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After having gone through a fairly long period of outperformance, the rally in the greenback seems to have somewhat stalled – uncertainty and caution will become the dominant theme around the Fed meeting. Following recent concerns about global growth, some investors feel calls for the Fed to delay an end to the asset purchase program are warranted.
However, I feel this is unlikely, given the $15 billion left is merely a token amount and won’t make a major difference. On the other hand, some analysts have commented, saying that, if the ‘considerable time’ reference is removed, USD would be supported.
Buying pullbacks in USD/JPY
The pair I will be watching closely is USD/JPY as there is also plenty of data to look out for on the Japan end. Yen weakness was attributed to reports the BoJ sees a high possibility of inflation falling short. This puts Japan’s inflation readings at the end of the week in focus.
We also have the BoJ meeting on the same day, with some are speculating we could finally hear something different from the recent rhetoric we’ve grown accustomed to. USD/JPY has dropped back below ¥108 early in Asia and I am in favour of buying the dips this week. The 50% retracement of the October drop and the 50-day moving average come in around ¥107.64 – I feel there could be buying opportunities in that region.